Financing the proposed Padma Bridge project from own resources would put pressure on Bangladesh Bank, limiting its capacity to serve local business at the time of releasing fund from the country’s foreign exchange reserve.

Finance Minister AMA Muhith dropped the broader hint in response to an appeal from Bangladesh Textile Mills Association (BTMA) at a meeting at the ministry yesterday.

BTMA urged him of taking steps so they get financial assistance from the central bank’s forex reserve for importing capital machinery for their factories.

Bangladesh Bank provides private sector with foreign exchange loan from its reserve, which at present, hovers around US$18bn – equivalent to around six months of import payments.

“The bank (Bangladesh Bank) will not be able to help the businessmen at that time,” Muhith told the BTMA delegation, led by its president Jahangir Alamin.

He said the government has already decided to take funds from the reserves during issuance of the work order for the bridge as it trying to mobilise funds from different sources. The central bank would maintain its strong forex reserve to support the project.

While announcing the Monetary Policy Statement for the second half of the current fiscal year late last month, Bangladesh Bank Governor Atiur Rahman had told that the central bank would build foreign exchange reserve to finance the Padma Bridge project – one of the six fast-track projects of the new government.

The World Bank and other development partners had suspended their financing decision of US$1.2bn for the US$2.9bn project on corruption allegation, before the government expressed its unwillingness to take the loan.

In response to another request, the minister said it would take time to solve the gas crisis the industries in Chittagong are facing.

The BTMA delegation also urged the minister to solve the hassles associated with releasing 5% cash incentive for the affected spinning mills. They pointed out that the government had declared special facility on September 20 in 2011 for the spinning mills that had been affected by purchasing cotton at very high prices.

But to receive the cash incentive, the spinning mills were required to submit copies of the Export Performance form and shipping bills. They argued that it was not possible for the spinning mills to submit those documents because the spinning mills were not directly involved with exports.

They were indirectly involved with the process through the export-oriented fabrics and ready-made garment manufacturers. They sought waiver of the tax at source on local letter of credit (LCs) and back-to-back LCs.

The BTMA leaders said the tax charged during payment of prices of cotton bought through local LCs was leaving a negative effect on the total export of fabrics. Thus it was raising the prices of cotton as well as yarn.

BTMA leader also sought waiver of the tax at source on raw materials bought through back-to-back LCs for manufacturing export-oriented products.

News:Dhaka Tribune/15-Feb-2014